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Impurity-led delay impacts FY27 semaglutide volume

* The delay in the commercial supply of semaglutide, due to an out-of-specification impurity issue in the semaglutide formulation, is expected to postpone the product ramp-up, with supplies likely to resume only by late Oct'26/early Nov'26. While there are no patient safety or regulatory concerns, the company has revised FY27 semaglutide volume guidance to 6-7m pens from the earlier guidance of 12m pens.

* While the estimated timeline for approval from Canada Health and the subsequent product launch was delayed by 5-6M, the current manufacturing issue is expected to further extend the benefit to be derived from this product.

* The timely resolution of the issue and the expected timeline for increased competition remain the key monitorables for DRRD’s business prospects from this molecule.

* Factoring in the slower semaglutide ramp-up, we cut our FY27/FY28 earnings estimates by ~11%/~2%, respectively, and revise our TP to INR1,210. While earnings are likely to remain under pressure in FY27 amid lower g-Revlimid contribution and delayed semaglutide supplies, we expect recovery from FY28 onwards, driven by normalization in semaglutide sales, improving base business growth, and potential Abatacept approval. We reiterate our Neutral rating with a revised TP of INR1,210.

OOS to delay Semaglutide commercialization by at least 4M

* DRRD informed that commercial supplies of semaglutide will be delayed after certain batches failed to meet the quality specifications due to an impurityrelated issue linked to the API manufacturing process. While the API met specifications, one impurity in the finished product was found to be outside the specification.

* The company has initiated a root cause investigation under GMP requirements and will re-manufacture validation batches before resuming commercial supplies. Product testing is expected to take a few weeks after validation.

* Commercial supplies are now expected to resume by late Oct'26 to early Nov'26. There are no patient safety concerns, product recalls, or impact on existing global regulatory filings, as there has been no change in product specifications.

* The quality issue is restricted to semaglutide injections and does not impact semaglutide tablets, which use a different API.

* DRRD also reiterated that its long-term partnership with OneSource remains intact despite the near-term disruption.

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